Retailers Report Mixed Results For May Same-Store Sales

Retailers provided further indications of a choppy recovery in consumer spending, even as most stores again reported higher monthly sales over easy year-ago comparisons.

Retailers, in general, said sales were slow early in the month and reported differing levels of spending on discretionary items. Despite that, retailers are expected to report higher sales for the month. The erratic results follow a strong holiday season and start to the year, when consumers showed a willingness to spend again and even pay closer to full price.

The results validate the posture many retailers adopted last month when reporting first-quarter results. While many reported strong growth, companies restrained from being overly optimistic for the full year.

Also affecting May sales was a calendar shift that put Memorial Day weekend into the June reporting period for many retailers. For example, Macy's Inc. (M) said its same-store sales in May would have been up by about 5% if not for the later Memorial Day. Instead, the company reported same-store sales of 1.4%, above the Thomson Reuters estimate of 0.9%.

"Our business trend strengthened toward the end of the month as the weather turned warmer and we approached Memorial Day," Chief Executive Terry Lundgren said.

Same-store sales are those sales at stores opened more than a year.

Target Corp. (TGT) said its same-store sales rose 1.3%, a whisker ahead of expectations for a 1.2% advance. The retailer also said that it saw a rise in sales made on its credit card, suggesting consumers are becoming a bit more comfortable about extending themselves.

But Target, like other retailers, said it sees continued volatility in the pace of the recovery.

Costco Wholesale Corp. (COST) said it saw continued weak television sales and softness in its international business, but that results were strong across housewares, home furnishings, small appliances, and jewelry. Costco reported a 9% increase in same-store sales, which missed analysts' estimates for a 9.7% gain.

Wet Seal Inc. (WTSLA) posted a drop in sales, but not by as much as analysts' projected. The apparel retailer said it remains cautious about the second quarter but is hopeful that its June results can benefit from buying that occurred over the latter part of the Memorial Day weekend.

Results were mixed from teen retailers, always a good indication of discretionary spending. Zumiez Inc. (ZUMZ) and Buckle Inc. (BKE) surpassed projections, while sales at Abercrombie & Fitch Co. (ANF) and Hot Topic Inc. (HOTT) declined wider than expected.

All told, the 28 retailers tracked by Thomson Reuters are expected to post same-store sales growth of 2.6% for May. Wal-Mart Stores Inc. (WMT), the nation's biggest retailer, doesn't report monthly same-store sales.

As of 8:18 a.m., Thomson Reuters said 13 of the 21 retailers that had reported by then had surpassed analyst expectations.

May results were expected to be erratic following April's soft showing as retailers indicated that last month started off slowly. In between, the stock market was pummeled over concerns about Europe and the historic oil spill.

The see-saw showing so far in 2010 is a sign of consumers' uncertainty as they deal with an unemployment rate near 10% and other economic concerns. Even the recent strength in housing is being attributed to federal tax credits that have now expired.

"People are acting like turtles," said Mike Berry, director of industry research for MasterCard Advisors SpendingPulse. "And right now they are pulling their heads back in."

Working in retailers' favor is that few appear to be engaging in big markdowns that got them into so much trouble during the recession. They are holding the line on prices as they better match their inventory to demand.

"Something to keep an eye on is if retailers start using pricing incentives to try and get customers back in stores," Berry said.

The move would say a lot about how consumers are feeling going forward. If consumers put the brakes on what buying they were doing, retailers will be forced to ratchet down their own expectations for the year.

Richard Galanti, chief financial officer at Costco, said last week that customers "are buying more food and sundries and less $1,000 TVs."

-By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com

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